Feb272012
Housing bust losers portray themselves as victims and heroes
Many people bought during the housing bubble because they wanted a home for their families. They stayed within reasonable debt-to-income guidelines and used fixed rate mortgages. Unfortunately, the prudent were small in number, and most of them have obtained loan modifications to make their super-sized debts manageable.
Many other people bought during the housing bubble because they saw their house as an investment, or worse a cash cow they could milk periodically to supplement their spending. These people saw rising house prices as a way to cash in on the American dream. They believed their houses would go up in value forever and provide them with everything their hearts desired.
We see this as folly now, and a few of us saw it as folly at the time, but as with most financial manias, everyone making easy money was blinded to the foolishness they participated in. Rather than admit their mistake and accept the consequences, many of the losers from the housing bubble seek out ways to game the system for personal gain and justify their actions. They portray themselves as heroes, Robin Hoods that steal from the rich and give to themselves.
Housing crash survivors fight back
By Anna Fifield in Phoenix — February 24, 2012 4:23 pm
The dozen men and women sat in a darkened room at a sprawling Aztec pyramid-shaped Mexican restaurant in Phoenix, parrots hanging from the ceiling, recounting the stories of their personal ordeals.
The gathering had all the hallmarks of a group-therapy session. But it was not a meeting for recovering alcoholics or victims of domestic violence. It was a meeting for survivors – and wannabe survivors – of the housing market crash.
“I’ve been searching for a local group like this for so long – it’s meant to be,” said Kathi Sharpe, a 53-year-old substitute teacher and single mother-of-five, attending her first meeting.
After falling victim to a dodgy mortgage broker, she has been fighting the system – and homelessness – for a decade, but she had been fighting it alone, until now.
Falling victim to a dodgy mortgage broker? I think the reporter means to say “After buying a house she could not afford or extracting all the equity for a spending binge, she has been gaming the system for a free handout.” Notice how the reporters choice of words makes this woman look like a victim who is not responsible for her own decisions. That meme is common in the mainstream media, and it’s complete bullshit.
The weekly meetings are the work of Darrell Blomberg, a self-styled “foreclosure strategist” who has not paid his own mortgage for 48 months. The former real estate agent is now helping other distressed Phoenix homeowners stay in their houses.
Let me help out this reporter again. “A delinquent mortgage squatter and failed realtor who successfully gamed the system for four years of free housing, Darrell Blomberg teaches others how to game the system to their own advantage.”
… Mr Blomberg found himself facing foreclosure after Countrywide Financial, the troubled mortgage lender, foreclosed on four houses he was trying to sell, a move that robbed him of his income.He missed two months’ payments but when he tried to catch up, the lender’s terms were so bad that he “decided to push it a little bit”.
Notice how people asking for a handout — a unilateral change to the contract totally in their favor — actually complain about the terms not being good enough. Unbelievable! And when the new terms in their favor don’t meet the borrower’s desires (total forgiveness of debt), this somehow justifies all manner of retaliation against the lender. I am constantly amazed at the capacity of some people to rationalize their bad behavior.
“I noticed that the notary had not dated her signature and I discovered that this makes a massive difference,” Mr Blomberg said.
By continuing to spot administrative errors and by writing challenging letters, he has managed to stave off a trustee sale of his house three times and still has not made any mortgage payments.
So this “hero” has gamed the system through technicalities to obtain free housing. This is something to aspire to? Should we erect a statue of this guy at the headquarters of B of A?
He knows he is fighting a losing battle – and estimates he will probably end up owing $370,000 on his $133,000 house. “My goal is to get a loan modification but I’ve been such a curmudgeon about this, they are just going to get me out of the house,” he said.
I think the word is asshole, but curmudgeon will suffice.
For Mr Blomberg this is now about more than the roof over his head. It has become a crusade.
“I’m taking a stand. If you want my house, you have to follow the law,” he said.
OMG! Did he just lecture us on following the law? He isn’t exactly a holy crusader fighting for truth, justice, and the American way — at least not the American way I believe in.
Bank of America said it had made multiple attempts to review Mr Blomberg’s case for a modification over the years but he had not responded to requests to supply documentation.
The man telling the bank to follow the law can’t seem to follow simple instructions — part of complying with the law to get a HAMP modification.
Don Blount, a mortgage broker whose business collapsed with the housing market, started a similar group, the Arizona Foreclosure Recovery Group, last May but is trying to help distressed homeowners in a different way.
Yes, he is finding a different way. He is trolling for business.
Some owners whose houses were foreclosed upon at the bottom of the crash, in 2008 and 2009, are now becoming eligible to requalify for Federal Housing Administration loans.
“There’s a high degree of frustration – none of this stuff has really worked,” Mr Blount, who operates in upscale Scottsdale, says of the government’s efforts to fix the housing market crisis through programmes such as the two versions of the Home Affordable Refinance Programme. “Most people feel like the banks are still profiting from foreclosures.”
Most people are pretty ignorant if they believe banks are profiting from foreclosures. Banks are losing billions. But creating the perception banks are profiting helps people justify their own actions against the evil corporations.
Rob Estes, who is fighting the foreclosure of his Phoenix house, is chastened.
“I played the game of cops and robbers,” said Mr Estes, who has managed to stay in his house, thanks to Mr Blomberg’s help.
Yes. He was the robber.
“Don’t borrow money,” he shrugs after attending one of Mr Blomberg’s weekly meeting. “That’s what I’ve gotten out of all of this.”
Well, if he got the message not to borrow money, then their group was a partial success.
I don’t know if you need to modify “mortgage broker” with “dodgy”? Isn’t that understood? An honest mortgage broker does not exist. They were the most culpable actors in this housing bubble.
What percentage of people understand even the simple math behind a mortgage loan, much less how a negative amortization “pick your payment” option-ARM works? Borrowers are stupid, for the most part, and need more protection in these big financial decisions.
Prior to the housing bubble, I would have sided with Conservatives on the issue of protecting people against themselves. Now, I believe stupid borrowers do need to be protected against themselves. There are certain types of loans — most notable Option ARMs — that should be available only to a select few who have accredited investor status.
Not all mortgage brokers are dodgy, but in 2005 I would say many, if not most, of them them were. It was the most dodgy who made the most money. The honest mortgage brokers who were looking out for the best interest of their clients starved during the housing bubble because they lost so much business to the dodgy ones.
I remember working in the same building as Instifi.com circa 2004 (Michelson near Jamboree).
What a train wreck. An ambulance every month or so responding to day-time coke overdoses. A bevy of well endowed, tramp-stamped, bleached blonde, orange skinned admin girls fresh from the 909 up and down the elevators all day (they paid for boob jobs for female employees). Limo’s showing up on Friday afternoons for “party time”. You could just feel the sleaze seeping out of that building.
And they collapsed in 2004 or so, well before the tide went out – so you can imagine what a poorly run operation that was.
I would have sided with Conservatives on the issue of protecting people against themselves. Now, I believe stupid borrowers do need to be protected against themselves.
I’m having a very difficult time arguing against this statement. There was a reason you needed to save 10% to 20% and have a stable job. These requirements lead to only small bubbles and protected the financial health of the banking system.
By 2006, you even had executives in banks saying that constant refinancing and growing debt was healthy. Debt serfdom was encouraged.
Maybe not all at once, but I like to return to the pre-bubble credit requirements. However, I doubt that will be exactly like it was before. The banking industry loves socialized losses.
Back when I started in the RE Business in 1975 in pristine Mission Viejo, we had the usual bevy of mortgage and title guys that called on us daily, left their card on my desk. One was easily the “best in the Business”….he carried in the trunk of his car boxes of blank IRS forms to fill out to “adjust income”, but he always knew exactly what was going on with your buyer’s loan, and they always closed. Another rated 2nd….easy to track him down at Houlihan’s any afternoon/evening….and very slick with the female agents and loved vacant homes…never sure what sort of a lousy loan you would end up with until signing loan docs. And then there was the tag team of “Slick and Slime”….guys you never gave a loan to, looked like they just blew in from Vegas, and if you saw them come into the office you had sudden bathroom needs to take care of. Nothing new.
That’s hilarious. Thanks for sharing.
The root behind this problem is not what is covered in the article or in any of these commnets.
The only reason people need “protection” from themselves is primarily because of government induced distortions. This is the reason why it was profitable to make loans to these complete deadbeats in the first place.
So what made these loans possible? Well, first there is the securitization process created by FNM and FRE. This was not all of it but definitely most of it.
Then there is deposit insurance. If FNM and FRE either did not exist or have implicit (now EXPLICIT) government backing, banks could not have unloaded their mortgage garbage onto someone else and without deposit insurance, there is no way they would have underwritten this crap and kept it. They would not have done both because the shareholders and the depositors would not stand for it.
Another big reason is the “Greenspan put’ which culminated in the bank bailouts in 2008. If market participants had not been lulled into a false sense of complacency, they would have been much less likely to take the reckless risks they did, mostly with someone else’s money.
Another reason is not specific to government but to the general mindset. At some point for the reasons I have provided and others, both creditors and investors simply became less conservative and eventually, completely reckless with lending standards. Despite the calamity of 2008 and after, even this is apparently not enough to change enough people’s minds toward lending conservatism because lending standards are STILL far from prudent.
Reality is, the massive fraud-laden (banking, accounting, hyper-inflated appraisal, mortgage and subsidation) bubble that artificially inflated home values began in the late 90’s… meaning about 13+ years worth of buyers bought a scam. To date, never before has RE been more mis-priced.
You are so right, el O. Which means that everyone who bought in that extended time frame OVERPAID for their asset.
This gets to the fundamental flaw with the original post. Sorry Irvine Renter, but sometimes you are really off, and this is one of those times. Depending on the timing and the location of your purchase, you may have overpaid by a lot or by a little. But all overpaid. So “prudence” really wasn’t an option. You bought imprudently or you didn’t buy.
Moreover, many of us lost our homes because of job loss and a significant drop in income. Yes, it was imprudent of us to lose jobs through no fault of our own, but we’ve paid for it many times over. Are you happy? Many of us did buy within our means, did put 25% down, and did not take out any equity. Stop, stop, stop painting us all as criminals or criminally retarded.
Anyone see this interview in the OCR yet?
“Ray Maggi is CEO of MPMS Inc., which manages over 2,500 apartments from Fontana to Costa Mesa. He’s been the president of the Apartment Association of Orange County six times and was president of the California Apartment Association in 1983.”
http://lansner.ocregister.com/2012/02/26/foreclosures-sap-demand-for-apartments/159039/
My favorite part:
Us: What are the prospects for renters these days?
Ray: It’s a balanced market now. There’s still vacancies. Everyone says we’re down to 5% vacancies now. Those numbers are a little bit distorted.
The people that do those surveys ask the manager, what’s going on, how many two-bedrooms do you have, etc., etc. What’s the vacancy. Guess what? We tell our managers to lie. Nobody wants to say it. If they got a lot of vacancies, they don’t want to admit it. They don’t want to be put in a position where the residents know they have 20 vacant out of 100 units. That puts (the residents) in a pretty good bargaining position. So you pick two or three units, and that’s all you show.
I get a kick out of watching those numbers.
Us: So the reason for not telling the number of vacancies is it would put you at a competitive disadvantage?
Ray: With the residents, yeah. If you’re a resident and you walk in and you tell a resident this is the last two bedroom that you have, what’s your thinking when you’re ready to sign up? If I said, there’s this two bedroom, but we have 20 of them, so don’t worry about it.
Us: Aren’t these surveys anonymous?
Ray: The managers are told not to (give all the vacancies). … No. 1, they don’t know who’s calling. If RealFacts calls us, we tell them the same thing we tell the residents who are walking up the street. … (But) concessions are down. They’re almost gone, which means the market is stabilizing.
Surprising Lasner even printed this. I do give credit for Mr. Maggi for telling the truth.
There are a few good brokers out there. The NMLS Licensing piece is straining through the remaining yahoos still in the business. No system is perfect, but hopefully we’ll see some quality shops surviving because of re-regulation being done today.
At least once a week I get “well,… the house was in my name, but my wife wasn’t on the loan so we’re good to buy, aren’t we?” phone calls. One person went as far as to write me a note saying “I’ll just lie on the application (about a prior foreclosure). What’s the worst they can do to me?”.
This victim attitude is the visible, tangible result of our “no-consequense for bad behavior” society. Abnormal is now the accepted normal.
My .02c
U.S. job quality is in trouble
http://www.marketwatch.com/story/us-job-quality-is-in-trouble-2012-02-27?siteid=rss&rss=1
Banks make money on foreclosures? How can anyone be so illogical as to imagine this?
I mean….
(1) Either the house is worth more than the loan, or it’s not.
(2) If it is…the owner can sell it, pay off the mortgage, and have a small cash surplus to put toward his new home, or pay a few months’ rent, whatever. That is, the owner profits by the sale of the house.
(3) Conversely, if the owner can’t sell it for a price above the mortgage, then by definition when the bank forecloses and sells it, they’re going to lose money.
The only possible way a bank can profit from a foreclosure is if…
(a) The house is worth more than the mortgage, but…
(b) The owner can’t or won’t pay the mortgage, and won’t sell the house and “steal” the profit the bank would make foreclosing and selling.
In which case, I’m not getting why I should feel sorry for the owner, who is either an idiot or far greedier than the bank.
It’s easy to make money on a FC with the fees to to charge to the owner of the loan. As long as the bank is not the loan owner or the note is guaranteed and or backed by Fed, GSE, FHA, etc., the fees can be charged against the principal. The loss will be covered by the taxpayers. This is not free market, but a slave market for the taxpayer and those bought and held houses in the bubble market.
Regulations are not all bad. When you buy a drugs such as Motrine, do you test each bottle of Motrine before using it? Without regulations, you would need to test it yourself before using it. There’s alots of places to hide things in a typical 12+ pages loan contact. There needs to be truth in lending with smiple English (x% APR on a loan of $y, with payment of $ per month due on the x day of the month. Payments are used as shown in the Payment schedule, intestest, loan balance are on the attachment.
Most Americans can’t do math. They are trained that way to facilate the indoctrination.
The existing Truth in Lending already contains the the things you’ve listed in one page.
http://img.docstoccdn.com/thumb/orig/9204932.png
That’s stupid. There are only two key facts about a home loan that you need to know: (1) You borrowed $x. (2) You need to pay it back.
I don’t think anyone who signs a loan doc is unaware of these two facts. If they, nevertheless, get into trouble, it’s either the result of bad luck — job loss, serious illness, divorce, the usual Horsemen — or stupid wishful thinking — hoping that there’s some loophole in (1) and (2) that will let you get off the hook somehow.
Sure, maybe the mortgage broker was a scam artist, and sold you something too good to be true. And you didn’t suspect that? You didn’t ask questions? That’s the kind of person who orders everything off the late-night informercials, and no amount of screaming 28pt warnings THIS IS NOT A GOOD IDEA will make a hair’s breadth of difference.
Some people can only learn not to touch hot stoves by actually touching one, and delaying that lesson doesn’t do them any kindness.
“Banks make money on foreclosures? How can anyone be so illogical as to imagine this?”
When people are searching for rationalizations to justify their own bad behavior, they won’t think too deeply about what they are saying. If in their mind the banks are greedy and that justifies ripping them off, they aren’t going to bother thinking about the supporting data behind their notion that the banks are greedy. Politicians are particularly good at glossing over uncomfortable facts to build an emotional argument. Now loan owners are doing the same thing.
That’s true. And, honestly, I don’t blame the people in such deep pain from saying silly illogical things. I do, however, blame those who are not in that kind of pain uncritically reporting it — like the reporter in this story — and others from preying upon it.
This is an area where I agree with the conservatives: you need a strong social pushback against this kind of thinking. We should not condemn the person in extremis who says it, but we should all be clear that he’s not right in his head — that he’s saying silly illogical things because he’s under intolerable emotional strain — and we should come down harshly on those not sharing that pain who encourage it, or prey on it.
I may feel sorry for the misfortunes of the greedy, covetous and ill responsible. But like feeling sorry for a druggie, I not going to sell my children nor children’s future to support a druggie habits or in this case their borrowing and spending habits.
That should also apply supporting the WS and the banks’ bad behaviors, but we’re forced to pay or go to prison. The forced payments are higher taxes for the bailout ($3 trillion), artifical low investment interest, inflation, carrying borrowing cost, etc.
Mortage modification and principal reduction programs are just other ways get the people to unknowingly support the moving liability from the banks to the taxpayers.
That also applies to greedy, covetous and ill responsible “home owners” would depleted their equility using refinancing and can’t make the higher payments. They should have cash from the equility withdraw to pay back the loans. Or did they Ponzi the cash in the stock market? Why should my children go without to pay for their life style?
“Why should my children go without to pay for their life style?”
That is the real question. Why should any of us have to pay the bills of the Ponzis?
Interesting story from Real Estate attorney Ron Ballard …
Monday, February 27th, 2012 at 9:07am
Do Short Sales Net Banks 24% More Than Foreclosures?
Posted by Ron Ballard
Despite the ”professional” statisticians analyzing the distressed property markets, one independent brokerage decided to gather the facts themselves. They concluded that in 2011 bank owned foreclosure properties sold for 24% less than short sales.
http://www.californiashortsalelawyer.com/2012/02/agents-find-short-sales-net-more/#more-447
“Notice how people asking for a handout — a unilateral change to the contract totally in their favor — actually complain about the terms not being good enough.”
Well, purely from the stance of negotiation theory, this guy does have the right idea. The bank is at risk of losing $300,000 and he’s not at risk of losing anything (his FICO is already toast). This gives him the upper hand in the negotiation.
HAMP is the best modification deal going these days, but if he won’t document his income to qualify, the bank will have no choice but to foreclose on him. A guy like this has a very low probability of paying anyway, because he’s always going to feel like he could have gotten a better deal and will default in a few months to test that assumption.
Re: Subject property on Via Pera It should be noted that this property was built by Mission Viejo Company in 1968-69. Sold new for $9,000 +/-. On the very edge of the boundry boardering El Toro. Became a truly run-down ghetto, not long after it opened as the local refuge for newly divorced Dads. From 1980 to the present the prices went through the roof, despite the dreadful condition and location. Looking through the foreclosure notices in the 2006-2010 time period, nearly all of them were “Maria Martinez”, “Estrella Hernandez”….all single women, sole and separate property, all with outrageous loan amounts ranging to the mid $400,000’s. Could easily qualify as a “gang injunction zone”.
Awesome stories posted above, LOL. There’s so much raw material here for a killer TV series about the housing bubble, the roaring good times and the scorched earth aftermath. And there are so many great characters to throw in and develop here, from “Slick and Slime” to “909s” to granite countertops, Realtor Hummermobiles and leather skinned peroxides. Aw God, someone should call up USC’s film school and get going on all of this.
Sort like the Mad Men of the 2,000’s.
Let’s have a naming contest for the the new show.
I don’t know man, but for the first scene definitely needs to be inside the office of one of these weird mortgage brokers in 2004 nailing down yet another $750K no doc loan….and leaving early..like 11:00 a.m….. for Houlihans. 🙂
Great here is what my Assemblyman (Mike Feuer 42nd District) is doing to gum up the system even further (from his Feb eNewLetter).
Foreclosure Bill Package
We’ve got to take stronger steps to tackle a foreclosure crisis that continues to devastate families and neighborhoods throughout California. The following bills would help alleviate foreclosure-related problems that touch all of us:
AB 1602 (Eng/Feuer) would limit banks’ ability to foreclose on a borrower’s home while the borrower is negotiating a loan modification. Currently, there are no restrictions on the practice of “dual tracking,” where banks foreclose and evict homeowners even when they are in the process of seeking loan modifications.
AB 1599 (Feuer/Fong) would require that banks translate documents related to foreclosure proceedings into the primary language spoken by the borrower. Current law places no obligation on banks to provide foreclosure documents in any language other than English, hindering the ability of non-English speaking borrowers to seek loan modifications or take steps to keep their homes.
AB 1603 (Feuer/Eng) would prohibit mortgage loan servicers from requiring borrowers to pay for unnecessary insurance products. Under existing law, mortgage servicers are able to impose property insurance (known as “force-placed insurance”) for a homeowner if they know or suspect that the homeowner has failed to maintain property insurance for the property. The servicer is then able to add the cost of the coverage to the homeowner’s mortgage bill. While it may seem reasonable for loan servicers to assure a home is covered by insurance, in many cases force-placed insurance carries a rate considerably higher than the market rate for covering such property. In addition, servicers often purchase forced-rate insurance policies from subsidiary or affiliated companies of the servicer and benefit financially from the transaction, creating a potential conflict of interest. This bill would curtail these practices.
“that touch all of us”..
Hmm, does Mr. Feuer have a foreclosure problem of his own?
“Feuer” is German for “fire”.
As soon as the banks go bankrupt and take the losses on their sorry business model. People should then leave their homes.